“Shares of French energy giant Total tanked 7% thanks to a gas leak from the company’s Elgin Franklin field in the North Sea.
Obviously investors are concerned about some kind of Macondo-like fallout.
JPMorgan analyst Nitin Sharma points out that Total has suffered an absolute loss of market value of $7.8 billion.
But Sharma thinks there are some major differences between BP’s Macondo spill and this gas leak.
While Total has said that they have noticed a sheen on the ocean’s surface, Sharma says natural gas will bubble to the surface and then disperse. The most crucial thing at this point would be to avoid an ignition point. “Most condensate (very light oil) will also evaporate into the air, helped by higher prevailing ambient temperatures. Macondo leaked light oil, which accumulated as slicks at the surface and then spread.”
Second, he says this has happened post-Macondo at a time when the industry is much better prepared to deal with a spill and capable of preparing a relief well.
Finally, Sharma says the Elgin Franklin field is much shallower water but the real problem will likely be when Total has to drill a relief well since their reservoir is deeper below the seabed than BP’s Macondo reservoir:
“The Elgin Franklin field is located in a water depth of 93m (305 feet). The Macondo well was drilled in a water depth of around 1,522m (4,993 feet). The main Elgin Franklin reservoir is high pressure, high temperature and located at a depth of around 17,400 feet (c.5,300m). The Macondo reservoir was 13,000 feet below the seabed – so Elgin Franklin’s reservoir is actually deeper (this may have implications for the time required to drill a relief well).”
The cause of the leak has not yet been found but Sharma maintains that the market is over-reacting to the news.”
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